GRUSF 10-K & 10-Q changes, risk factors and insider trading

In addition to events discussed elsewhere in this Quarterly Report, the following developments occurred during, or have a direct bearing on, the three and six months ended MarchJune 31,30, 2026:

Illinois expansion. On March 12, 2026, the Company announced that it had taken operational control of a cannabis production facility in Dwight, Illinois, through its affiliatesaffiliate Grown Rogue Management Associates, LLC (“GRMA”), an 80% owned subsidiary of the Company, and entered into a Membership Interest Purchase Agreement to acquire a 49% interest in SEA Craft, the holder of an Illinois Adult Use Cannabis Craft Grower License. The agreement provides GRMA with an option, subject to regulatory approval and performance-based conditions, to acquire the remaining 51% of SEA Craft, and concurrently grants the holder of those remaining interests an option, subject to certain conditions precedent, to require GRMA to purchase those remaining interests. The transaction is subject to regulatory approval by the Illinois Department of Agriculture,Agriculture. and asAs of MarchJune 31,30, 20262026, the status of the required regulatory approvals required to consummateand the transactionclosing had not been obtained, and accordingly,of the acquisitionSEA had not closed. The Company expects theCraft acquisition toremain close in the second quarter of 2026.outstanding.

ABCO Phase II construction. As previously disclosed in our Annual Report, on December 8, 2025, ABCO entered into an agreement with Blackwell & Associates (“Blackwell”) for the construction of the Grandview Phase II project located at 1425 Grandview Avenue, Paulsboro, New Jersey, on a cost-plus-a-fee basis without a guaranteed maximum price. The total estimated cost is approximately $1,430,000, which includes the cost of the work plus Blackwell’s fee, subject to adjustments under the contract documents. Construction continued duringthrough the threedate monthsof endedthis March 31, 2026.report. Blackwell is considered a related party as it is controlled by the spouse of the majority owner of ABCO Holdings.Garden State, LLC.

Reclassification of warrants to derivative liability. As a result of the change in functional currency described above, 4,000,000 warrants previously classified within shareholders’ equity no longer met the criteria for equity classification under U.S. GAAP and were reclassified to a derivativewarrant liability measured at fair value, with subsequent changes in fair value recognized through profit or loss. On January 1, 2026, the Company recognized $1,539,665 of warrant liability with a corresponding decrease in share capital. During the threesix months ended MarchJune 31,30, 2026, the Company recorded an a net unrealized gain of $770,714$433,547 on changes in the fair value of the warrant liability,liability (comprising an unrealized gain of $770,714 in the first quarter and an unrealized loss of $337,167 in the second quarter), resulting in a warrant liability balance of $768,951 $1,106,118 at MarchJune 31,30, 2026. For further discussion, see Note 13.212.2 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Comparison of the Three and Six Months Ended MarchJune 31,30, 2026 and 2025

Cost of finished cannabis inventory sold for the three months ended MarchJune 31,30, 2026 was $5,198,024,$5,903,860, an increase of $1,411,588$1,448,358 or approximately 37%33% as compared to $3,786,436$4,455,502 for the three months ended MarchJune 31,30, 2025. For the six months ended June 30, 2026, cost of finished cannabis inventory sold was $11,101,884, an increase of $2,859,946 or approximately 35% as compared to $8,241,938 for the six months ended June 30, 2025. Cost of revenues grew at a rate faster than the rate of revenue growth (28%), largely due to mix and higher operating lease costs includedbroadly in costline ofwith sales.revenue, reflecting product and market mix.

Income tax expense for the three months ended March 31, 2026 was $516,871, with a corresponding effective tax rate of approximately 30.5%, as compared to $631,310 and an effective tax rate of approximately (46%) (on pre-tax income)$871,331 for the three months ended MarchJune 31,30, 2026 as compared to income of $920,037 for the three months ended June 30, 2025. Income tax expense was $1,388,202 for the six months ended June 30, 2026, as compared to $1,551,347 for the six months ended June 30, 2025. The effective tax rate continues to be heavily influenced by the Company’s uncertain tax positions related to the treatment of certain transactions and deductions under Section 280E of the Internal Revenue Code. As at MarchJune 31,30, 2026, the uncertain tax liability totaled $9,280,905 (December 31, 2025 - $8,383,888),liability, inclusive of penalties and interest, was approximately $9,830,257 (December 31, 2025 - $8,383,888) and is included in other non-current liabilities.

Net loss for the three months ended MarchJune 31,30, 2026 was ($2,213,391)$1,481,024, as compared to net income of $742,870$1,655,378 for the three months ended MarchJune 31,30, 2025. NetFor the six months ended June 30, 2026, net loss attributable to shareholders was ($2,702,217) for the current quarter$3,694,415 as compared to net income attributable to shareholders of $598,782$2,398,248 for the prior-yearsix quarter.months ended June 30, 2025. Net loss attributable to shareholders was $1,692,836 for the current quarter and $4,395,053 year-to-date, with net income attributable to non-controlling interests of $211,812 and $700,638, respectively.

The Company operates in three reportable segments -– Oregon, Michigan, and New Jersey -– with general corporate and administrative expenses included within “Corporate” to reconcile the reportable segments to the financial statements. The following summarizes performance by segment for the three and six months ended MarchJune 31,30, 2026 and 2025:

For the three months ended MarchJune 31,30, 2026: net revenue of $2,996,764$3,511,544 (Oregon), $2,743,527$3,392,595 (Michigan), and $3,415,367$4,369,698 (New Jersey); gross profit of $551,164$1,209,207 (Oregon), $1,325,262$1,586,755 (Michigan), and $2,081,208$2,574,015 (New Jersey); and net income (loss) of $64,417$459,258 (Oregon), $349,578$439,146 (Michigan), $1,044,791$1,559,291 (New Jersey), and $(3,676,1773,938,719) (Corporate).

For the three months ended MarchJune 31,30, 2025: net revenue of $2,873,347$3,075,599 (Oregon), $2,505,116$2,278,434 (Michigan), and $1,771,720$2,655,954 (New Jersey); gross profit of $1,303,832$1,069,878 (Oregon), $1,129,086$1,020,427 (Michigan), and $930,829$1,464,180 (New Jersey); and net income (loss) of $682,024$453,385 (Oregon), $508,656$467,694 (Michigan), $709,263$851,533 (New Jersey), and $(1,157,073117,234) (Corporate). Michigan segment revenue includes approximately $402,309 of excise taxes collected following the implementation of Michigan’s cannabis excise tax effective January 1, 2026.

All revenue for the three and six months ended MarchJune 31,30, 2026 and 2025 was earned in the United States. For the three and six months ended MarchJune 31,30, 2026 and 2025, no customer represented more than 10% of the Company’s net revenue, and as at MarchJune 31,30, 2026 and December 31, 2025, no customer represented more than 10% of the Company’s accounts receivable.

The following table provides a reconciliation of net income (loss), as reported, to EBITDA and Adjusted EBITDA (non-GAAP) for the three and six months ended MarchJune 31,30, 2026 and 2025:

We believe that our cash on hand at MarchJune 31,30, 2026, projected cash flows from current and future anticipated sales of finished goods, and net proceeds from current and anticipated financing activities, will be sufficient to meet our liquidity and capital resource requirements for the next twelve months from the date of issuance of this Quarterly Report on Form 10-Q.

At MarchJune 31,30, 2026 and December 31, 2025, our working capital was approximately $17,394,336$14,940,478 and $16,590,979, respectively, calculated as current assets less current liabilities (excluding the derivative liability and, for the current period,and the warrant liabilities, in each case representing non-cash fair value items). Cash and cash equivalents were $13,701,247$11,532,826 at MarchJune 31,30, 2026 as compared to $11,371,834 at December 31, 2025. Total current assets were $24,855,479$22,554,876 at MarchJune 31,30, 2026 as compared to $22,178,714 at December 31, 2025, with the increase reflecting growth in cash and cash equivalents and accounts receivable.2025.

Total current liabilities were $8,300,758$8,709,174 at MarchJune 31,30, 2026 as compared to $5,724,776 at December 31, 2025, with the increase reflecting growth in accounts payable and accrued liabilities ($2,731,607$2,544,834 at MarchJune 31,30, 2026 as compared to $1,262,519 at December 31, 2025), anda higher current portion of long-term debt ($3,002,684 as compared to $2,576,228), the reclassification of $768,951 of warrant liabilities fromof non-current liabilities$1,106,118 to current liabilities effective January 1, 2026 in connection with the change in functional currency, partiallyand offsetan by a slight decreaseincrease in income tax payable to $286,980$412,770 at MarchJune 31,30, 2026 (December 31, 2025 - $296,018).

Cash and cash equivalents increased by $2,329,413$160,992 during the threesix months ended MarchJune 31,30, 2026 to $13,701,247,$11,532,826, as compared to an increase of $4,914,717$4,681,969 during the threesix months ended MarchJune 31,30, 2025 (from $4,917,708 at January 1, 2025 to $9,832,425$9,599,677 at MarchJune 31,30, 2025).

Net cash provided by operating activities was $2,534,524$4,247,865 for the threesix months ended MarchJune 31,30, 2026, as compared to net cash used in operating activities of ($1,004,580)$656,881 for the threesix months ended MarchJune 31,30, 2025. The current-quartercurrent-period result reflects operating profitability and approximately $1,939,688$2,280,732 in favorable changes in non-cash working capital, principally driven by an increaseincreases in accounts payable and accrued liabilities of $1,469,088 and an increase in the uncertain tax position liability of $897,017,liability, partially offset by an increase in accounts receivable and a slight decrease in income tax payable.receivable.

Net cash used in investing activities was ($2,874,613)$6,291,761 for the threesix months ended MarchJune 31,30, 2026, as compared to $(333,822)$964,360 for the threesix months ended MarchJune 31,30, 2025. The current-quartercurrent-period use was driven principally by $2,517,414$5,498,773 in property and equipment additions (as compared to $241,532 in the prior-year quarterperiod), supporting the build-out of cultivation capacity at ABCO Garden State, LLC through the Grandview Phase II project,project and the Company’s ongoing buildexpansion outactivities, intogether Minnesota,with $200,000$415,000 inadvanced investmentson intothe purchase of the remaining Rogue EBC, LLC equity interest,interest and $157,199$377,988 in payments of business acquisition consideration payable.

Net cash provided by financing activities was $2,669,413$2,204,888 for the threesix months ended MarchJune 31,30, 2026, as compared to $6,245,287$6,301,925 for the threesix months ended MarchJune 31,30, 2025. Significant financing activities for the current quarterperiod included: net proceeds of $2,985,000 from the sale of a 20% non-controlling interest in GRMA (gross proceeds of $3,000,000 less $15,000 of issuance costs); $1,000,000 in proceeds from long-term debt; $21,839 in proceeds from stock option exercises; $500,000 in proceeds from long-term debt; $743,460$1,529,295 in repayment of long-term debt; and$37,500 in repayment of finance leases; and $85,156$235,156 of distributions to the non-controlling interests in subsidiaries (combining $28,356 of GRMA preferred return distributions and $56,800 of dividends paid by Golden Harvests, LLC to its non-controlling interest holder).subsidiaries.

As of MarchJune 31,30, 2026, the Company believes it was in compliance with all financial covenants under the Credit Facility, including the fixed charge coverage ratio and leverage ratio (each as defined therein).

For a complete description of our long-term debt, convertible debentures, derivative liability, and consideration payable on business acquisitions, refer to Notes 13, 14, 15, and 16 to the audited consolidated financial statements included in our Annual Report, and to Notes 11, 12,11 and 1312 in the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Set out below are undiscounted minimum future lease payments after MarchJune 31,30, 2026 based on the Company’s operating and finance leases. Total operating lease payments are approximately $28,221,812 $27,633,880 (consisting of $2,138,920$1,312,195 infor the remainder of 2026, $2,710,116$2,751,620 in 2027, $2,800,069$2,791,191 in 2028, $2,893,248$2,883,971 in 2029, $2,503,747 $2,494,052 in 2030, and $15,175,712$15,400,851 thereafter), less unamortized interest of approximately $13,637,899,$13,209,345, resulting in a total operating lease liability of approximately $14,583,913.$14,424,535. Total finance lease payments are approximately $235,000$216,374 (consisting of $161,250$142,500 infor the remainder of 2026 and $73,874 in 2027), less unamortized interest of approximately $25,000,$17,590, resulting in a total finance lease liability of approximately $210,000. The increase in operating lease obligations from December 31, 2025 primarily reflects the impact of signed lease extensions with the CEO for the Lars property quartering April of 2026. $198,784.

Contractual maturities of long-term debt asAs of MarchJune 31,30, 2026 are approximately $3,941,000 due within one year, $3,669,000 due in years two through three, and $7,937,000 due thereafter, totaling undiscounted long-term debt obligations of approximately $15,547,000, less unamortized interest of approximately $2,865,262, for a2026, total long-term debt was approximately $12,733,162 (comprising a current portion of $3,002,684 and a non-current portion of $9,730,478), as compared to $12,682,124 at March 31, 2026. Total long term debt payments are approximately $15,510,053 (consisting of $2,453,014 for the remainder of 2026, $3,815,153 in 2027, $2,934,466 in 2028, and $6,307,420 in 2029), less unamortized interest of approximately $2,776,891, resulting in a total long term debt liability of $12,682,124.approximately $12,733,162. For a complete description of the Company’s debt obligations, refer to Note 11 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

During the three and six months ended MarchJune 31,30, 2026 and 2025, we did not have, nor do we currently have, any off-balance sheet arrangements as defined in the applicable rules and regulations of the SEC.